The U.S. trade deficit narrowed slightly in July, but the gap with China surged to a six-month high. The Commerce Department reported the trade deficit dropped 2.7 per cent to $54.0 billion as exports rebounded and imports fell. Data for June was revised down to show the trade gap shrinking to $55.5 billion. The goods trade deficit with China increased 9.4 per cent to $32.8 billion.